(Bloomberg) -- Angola's central bank governor pledged to slow annual inflation to single digits by 2022 and said there's room to keep cutting interest rates, as the country continues to struggle with the economic fallout of low oil prices and declining production.
“If we don't manage to bring stability in terms of inflation, foreign exchange, at the end of the day we're not building the infrastructure to promote sustainable growth,” Central Bank Governor Jose de Lima Massano said in an interview Wednesday in New York. “Given the current state of our economy, this is something we have to pursue.”
Speaking on the sidelines of the United Nations General Assembly, Massano said Africa's second-largest oil producer is struggling to sustain its foreign-exchange reserves, which he said now sit at about $10 billion. The economy contracted for the last three years, while consumer prices rose 17.9% in August from a year earlier.
The country has embarked on a bid to ease its management of the kwanza -- the worst performing currency in Africa in 2019 -- after burning through more than two-thirds of its reserves to defend it. The kwanza has lost about 17% against the dollar so far this year. The International Monetary Fund, which granted Angola a $3.7 billion, three-year loan in December, said in June a tighter monetary policy stance is needed to support the exchange rate.
‘Painful Process'
“We believe there is room to bring interest rates down so that we give a little more chance for businesses to survive,” Massano said. “We had a process of our currency being artificially valued and now you have to do something, it's a painful process.”
The central bank is due to announce its next rates decision on Sept. 30. It held the benchmark rate in July after cutting it to 15.5% in May.
Massano said that by the end of 2021 or the start of 2022, Angola wants to see single-digit inflation. At the same time, the country is embarking on what he said was a program to reform the banking sector, which is saddled by non-performing loans, produce rather than import basic goods such as rice, sugar and beans, and privatize more than 150 companies in the next three to four years.
--With assistance from Candido Mendes and Prinesha Naidoo.
To contact the reporter on this story: Nick Wadhams in New York at nwadhams@bloomberg.net
To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net;Rene Vollgraaff at rvollgraaff@bloomberg.net
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